Responding to a claim - Discontinuance and settlement

Learning Outcomes

This article outlines discontinuance and settlement in civil litigation, including:

• Notice of discontinuance: how, when, and by whom it must be filed and served, when court permission or other parties’ consent is required, and how partial discontinuance is recorded on the court file
• Costs position following full or partial discontinuance: standard versus indemnity basis, the QOCS overlay in personal injury claims, orders restricting future proceedings, and the impact on any subsequent claim based on the same facts
• Consent orders versus Tomlin orders: what belongs in the body of the order versus a confidential schedule, enforcement mechanisms, and when each form of order is tactically preferable
• The Part 36 regime: formalities, the relevant period, acceptance (in time and late), withdrawal and amendment, requests for clarification, and the costs and interest consequences at trial, including the claimant “beating” their own offer, split-costs orders where the defendant’s offer is not beaten, and late-acceptance scenarios
• Strategic interactions between discontinuance, settlement (including ADR-driven stays), counterclaims/Part 20 claims, and the court’s case management powers, with emphasis on exam-style fact patterns and common SQE1 traps

SQE1 Syllabus

For SQE1, you are required to understand discontinuance and settlement in civil litigation, with a focus on the following syllabus points:

• the procedural requirements for discontinuing a claim, including notice, timing, multi-party consent, permission where required, and partial discontinuance
• costs on discontinuance under CPR 38 (standard rule and exceptions), interaction with QOCS in personal injury, and restrictions on subsequent proceedings
• settlement mechanisms: consent orders under CPR 40 and Tomlin orders (structure, confidentiality, “liberty to apply”, and enforcement)
• Part 36 offers: content and service, relevant period, clarification, withdrawal and amendment, acceptance and late acceptance, and the range of costs and interest consequences
• the effect of settlement on proceedings (stay, dismissal, discontinuance) and on enforcement, and the continuation of counterclaims/Part 20 claims
• judicial encouragement of ADR and stays for settlement; practical and strategic considerations for claimants and defendants

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What must a claimant do to discontinue a claim after a defence has been filed?
2. What is the usual costs consequence for a claimant who discontinues proceedings?
3. What is the difference between a consent order and a Tomlin order?
4. What are the main cost consequences if a claimant rejects a defendant’s Part 36 offer and fails to obtain a better result at trial?

Introduction

When a defendant is served with proceedings, the claim may not always proceed to trial. In many cases, the claimant may wish to discontinue the claim, or the parties may reach a settlement. Understanding the procedures and consequences of discontinuance and settlement is essential for effective litigation management and for SQE1. The CPR encourage early resolution at all stages, including by ADR; courts can stay proceedings to facilitate settlement and will consider parties’ conduct on ADR when deciding costs.

Discontinuance of a Claim

A claimant may decide to bring proceedings to an end before trial for various reasons, such as a reassessment of the merits, new evidence, or a negotiated resolution. The Civil Procedure Rules (CPR) set out a formal process for discontinuance.

Key Term: discontinuance
The formal withdrawal of all or part of a claim by the claimant, bringing proceedings (or part of them) to an end.

Beyond ending the whole claim, a claimant may discontinue only part of a claim (often described as abandoning a head of claim or a remedy), with costs consequences tied to that part.

Procedural Steps for Discontinuance

To discontinue a claim, the claimant must file and serve a notice of discontinuance on every other party to the proceedings. The notice must make clear it has been served on all other parties; where there is more than one defendant, it must specify against which defendants the claim is discontinued. Discontinuance only takes effect upon service on the other parties.

Key Term: notice of discontinuance
A formal document filed by the claimant to notify the court and all parties that they are withdrawing all or part of their claim.

If there is more than one claimant, all claimants must consent in writing to discontinuance or the court’s permission is required. Where the claimant needs the consent of a defendant (see below), the written consent must be attached to the notice.

In addition to whole-claim discontinuance, a claimant may discontinue part of the claim (e.g., abandon a claim for an injunction while continuing to seek damages). In that event, the notice should identify precisely what is discontinued.

Timing and Restrictions

A claimant may discontinue at any time, but discontinuance is not effective until the notice is served on all parties. There are specific restrictions or additional steps in certain situations:

• interim remedies: where the court has granted an interim injunction or a party has given an undertaking to the court, the claimant may discontinue only with the court’s permission
• interim payments: where the claimant has received an interim payment, the defendant’s written consent or the court’s permission is required
• protected parties: where a child or protected party is involved, court approval will be required to discontinue or compromise their claim
• multiple claimants/defendants: written consent from all other claimants is required; the claim can be discontinued against one or some defendants but continue against others
• counterclaims/Part 20 claims: discontinuance of the main claim does not automatically dispose of a defendant’s counterclaim or Part 20 claim, which may continue

Where a claimant discontinues after a defence has been served and then seeks to bring a further claim against the same defendant arising out of the same or substantially the same facts, the court’s permission may be required and/or the court may impose conditions, including a stay until costs of the discontinued action are paid.

Costs Consequences of Discontinuance

The general rule is that the claimant must pay the defendant’s costs incurred up to the date the notice of discontinuance is served. This applies whether the discontinuance is of the whole claim or only part of it, with costs limited to the discontinued element where only part is withdrawn. The court may order otherwise, but departures from the general rule are exceptional and usually require a good reason (e.g., significant late disclosure changing the position, or improper conduct by the defendant).

Key Term: standard basis
The usual method for assessing costs, where only costs that are reasonable and proportionate are allowed, and any doubt is resolved in favour of the paying party.

In personal injury claims, qualified one-way costs shifting (QOCS) limits enforcement of adverse costs orders against claimants. Where a claimant discontinues and no damages are recovered, a defendant’s entitlement to enforce its costs may be restricted by QOCS unless an exception applies (e.g., strike out on specified grounds, fundamental dishonesty, or set-off against sums the claimant is awarded).

Key Term: qualified one-way costs shifting (QOCS)
A costs regime in personal injury claims under which defendants’ costs orders against claimants are enforceable only to a limited extent, generally capped by sums awarded to the claimant, subject to specified exceptions.

Worked Example 1.1

A claimant issues proceedings for breach of contract. After the defence is filed, the claimant discovers new evidence that weakens their case and decides to discontinue. What must the claimant do, and what are the likely costs consequences?

Answer:
The claimant must file and serve a notice of discontinuance on all parties. The claimant will usually be ordered to pay the defendant’s costs up to the date of service of the notice, assessed on the standard basis.

Exam Warning

If a claimant discontinues and then brings the same or a substantially similar claim against the same defendant, the court may order that the claimant cannot proceed until the previous costs have been paid. The court may also require permission for a subsequent claim arising out of the same or substantially the same facts where discontinuance occurred after service of a defence.

Settlement of a Claim

Settlement allows parties to resolve a dispute without a trial. The CPR encourage settlement at all stages, and several mechanisms exist to formalise agreements reached between parties. Courts can stay proceedings to facilitate ADR and will take settlement efforts into account when managing the case and when deciding costs.

Key Term: settlement
An agreement between parties to resolve a dispute, which may be recorded in a formal court order or contract.

Consent Orders

A consent order records the terms of a settlement agreed by the parties and is approved by the court. It is enforceable as a court order. Consent orders are commonly used to record straightforward terms, such as payment of a lump sum within a specified period, dismissal of the claim, and the incidence of costs. If the defendant defaults on a money term in a simple consent order, the claimant can enforce the judgment directly.

Key Term: consent order
A court order reflecting the terms of a settlement agreed by the parties, enforceable as a judgment.

When drafting, put into the body of the order any terms that require the court to act (e.g., dismissing the claim, entering judgment for a sum, making an order for costs). Avoid placing complex performance obligations in the body of a standard consent order; a Tomlin order is usually more appropriate for that.

Tomlin Orders

A Tomlin order is a special type of consent order that stays proceedings on terms set out in a confidential schedule. The schedule may contain terms that go beyond what the court could order, such as future steps, confidentiality, or arrangements for works or services. Because the proceedings are stayed, the claimant does not need to issue fresh proceedings if there is default; instead they apply within the stayed proceedings to give effect to the schedule.

Key Term: Tomlin order
A court order staying proceedings on terms agreed by the parties, with the detailed terms in a confidential schedule. The court retains jurisdiction to enforce by lifting the stay and making such orders as are necessary.

Tomlin orders should include “liberty to apply” so a party can return to court to enforce or give effect to the terms without commencing a new action. Only put into the body of the order matters requiring a court order (e.g., the stay, payment out of funds held by the court, and the order as to costs). Set out all detailed obligations and any confidentiality in the schedule.

Key Term: liberty to apply
A provision in an order reserving the court’s jurisdiction to make further directions or orders to implement or enforce the settlement terms.

Worked Example 1.2

Two parties settle a claim for damages, agreeing that the defendant will pay in instalments and provide additional services. They want the terms to remain confidential. What is the most suitable order?

Answer:
A Tomlin order is appropriate, as it allows the detailed settlement terms to be kept in a confidential schedule and enables the claimant to apply to the court to enforce the terms if necessary.

Part 36 Offers

Part 36 of the CPR provides a formal mechanism for making offers to settle with specific cost consequences. Part 36 offers are treated as without prejudice save as to costs, meaning the trial judge does not see them until after judgment when costs are considered.

Key Term: Part 36 offer
A written offer to settle made under Part 36 of the CPR, which carries defined costs consequences if not accepted and the outcome at trial is less favourable.

Key Term: without prejudice save as to costs
A communication that is privileged on the merits but may be put before the court on the issue of costs after judgment.

A Part 36 offer must be in writing, state it is made under Part 36, and specify a period of not less than 21 days for acceptance.

Key Term: relevant period
The minimum 21-day period stated in a Part 36 offer during which, if the offer is accepted, the offeree will be entitled to their costs on the standard basis up to the date of acceptance.

If the claimant rejects a defendant’s Part 36 offer and fails to obtain a better result at trial, the claimant may be ordered to pay the defendant’s costs from the end of the relevant period, together with interest on those costs. Conversely, if a claimant makes a Part 36 offer and then obtains at least as much at trial, the court will, unless unjust, award enhanced benefits to the claimant from the end of the relevant period.

Parties may seek clarification of a Part 36 offer within seven days of service; if this is not provided, an application can be made for an order requiring clarification. Offers can be withdrawn or amended; before the relevant period expires, withdrawal or making the offer less advantageous generally takes effect only at the end of the relevant period unless the offeree accepts in the interim and the court grants permission to withdraw.

Key Term: indemnity basis
A method of assessing costs under which any doubt as to reasonableness is resolved in favour of the receiving party and proportionality is not a limiting factor.

When a claimant equals or beats their own Part 36 offer at trial, the court will, unless unjust, award:

• interest on damages at up to 10% above base rate from the end of the relevant period
• costs on the indemnity basis from the end of the relevant period
• interest on those costs at up to 10% above base rate
• an additional amount (calculated by reference to the award, subject to a statutory cap)

A Part 36 offer can be accepted at any time unless it has been validly withdrawn. Acceptance within the relevant period has automatic costs consequences. Late acceptance has different costs consequences: typically, the offeree pays the offeror’s costs from expiry of the relevant period to acceptance, unless unjust.

Worked Example 1.3

A defendant makes a Part 36 offer of £10,000. The claimant rejects the offer and proceeds to trial, where they are awarded £9,000. What are the likely costs consequences?

Answer:
The claimant will usually be ordered to pay the defendant’s costs from the end of the relevant period to judgment, and interest on those costs, as the claimant failed to obtain a better result than the Part 36 offer.

Worked Example 1.4

A claimant makes a valid Part 36 offer to accept £90,000. The defendant does not accept. At trial, the claimant recovers £95,000. What are the usual consequences from the end of the relevant period?

Answer:
Unless unjust, the court will award the claimant: interest on damages (at a rate up to 10% above base), costs on the indemnity basis, interest on those costs (up to 10% above base), and an additional amount calculated by rule (subject to the applicable cap), all running from the end of the relevant period.

Practical Considerations

Discontinuance and settlement are important tools for managing litigation efficiently. Claimants should always consider the strength of their case, the potential costs, and the benefits of settlement. Defendants should be aware of the costs protection offered by Part 36 offers and the strategic use of consent and Tomlin orders.

• strategic timing: a well‑pitched Part 36 offer can impose significant pressure. Defendants often await disclosure and witness evidence before offering; claimants may make early calibrated offers to secure Part 36 gains at trial
• counterclaims: discontinuing the main action does not end a counterclaim; a defendant with a viable counterclaim can proceed to seek judgment and costs
• partial discontinuance: withdrawing weak heads of claim may reduce trial issues and costs exposure; however, costs payable on discontinued parts can be significant
• form of settlement: simple payments and dismissal lend themselves to consent orders; complex, staged, or confidential terms are usually better in a Tomlin order with “liberty to apply”
• enforcement: a money judgment in a consent order is directly enforceable; under a Tomlin order, apply to lift the stay and seek an order giving effect to the schedule. Avoid placing enforcement‑dependent terms in a schedule that require separate proceedings
• ADR and stays: courts can stay for ADR at the directions questionnaire stage and later; unreasonable refusal to mediate may sound in costs

Key Term: relevant period
The 21‑day minimum period specified in a valid Part 36 offer within which the usual costs consequences of acceptance apply.

Revision Tip

Always advise clients to consider settlement and discontinuance options early, as costs can quickly escalate if proceedings continue unnecessarily. Where appropriate, deploy Part 36 and ensure settlement is captured in an enforceable form (consent order or Tomlin order) suited to the agreed terms.

Key Point Checklist

This article has covered the following key knowledge points:

• Discontinuance allows a claimant to withdraw all or part of a claim by filing and serving a notice of discontinuance.
• Permission or consent is required in specific cases (e.g., where there is an interim injunction or interim payment, or where protected parties are involved), and all other claimants must consent where there are multiple claimants.
• The claimant is usually liable for the defendant’s costs up to the date of discontinuance, assessed on the standard basis; in personal injury, QOCS may restrict enforcement of such costs.
• Discontinuance of the main claim does not end a counterclaim or Part 20 claim; those may continue.
• Courts may restrict subsequent proceedings arising from the same facts, including by staying a later claim until earlier costs are paid; permission may be required where a defence was served before discontinuance.
• Settlement can be formalised by a consent order or a Tomlin order, with the latter allowing confidential and flexible terms and “liberty to apply” for enforcement.
• Part 36 offers are formal settlement offers with specific cost consequences if not accepted and the outcome at trial is less favourable; late acceptance has defined costs effects.
• Claimants who equal or beat their own Part 36 offer at trial will usually recover indemnity costs from the end of the relevant period, enhanced interest, and an additional amount; claimants who fail to beat a defendant’s offer face split-costs orders from expiry of the relevant period.
• Strategic use of discontinuance and settlement, including ADR stays and Part 36, can save costs and court time and is considered during case management and on costs.

Key Terms and Concepts

• discontinuance
• notice of discontinuance
• standard basis
• qualified one-way costs shifting (QOCS)
• settlement
• consent order
• Tomlin order
• liberty to apply
• Part 36 offer
• without prejudice save as to costs
• relevant period
• indemnity basis